Question
P2.5 Cindys Restaurant has three sales revenue departments with direct costs and average monthly figures given in the following information: Departments Dining Banquets Beverages Sales
P2.5 Cindys Restaurant has three sales revenue departments with direct costs and average monthly figures given in the following information:
Departments | Dining | Banquets | Beverages |
Sales Revenue | $204,000 | $110,000 | $92,000 |
Cost of sales | 81,600 | 41,800 | 29,440 |
Wages and salaries cost | 65,280 | 35,200 | 12,880 |
Other direct costs | 18,360 | 8,800 | 1,840 |
Department | Dining | Banquet | Beverage |
Cost of sales | (81600/204000)*100= 40% | (41800/110000)*100=38% | (294400/92000)*100=32% |
Wages and salary | (65280/204000)*100=32% | (35200/110000)*100=32% | (128800/92000)*100=14% |
other direct expenses | (18360/204000)100=9% | (8800/110000)*100=8% | (1840/92000)*100=2% |
The restaurant also has the following indirect, undistributed costs: Administrative and general expenses $12,000 Marketing expenses $10,000 Utilities expense $5,000 Property operation and maintenance $12,120 Depreciation expense $14,000 Insurance expense $4,000
Dining 2,400 sq. ft. Banquet 3,000, sq. ft. Beverage 600 sq. ft.
P2.6 With reference to the information provided for Cindys Restaurant in Problem 2.5 :
c. If there were a shift of $8,000 in sales revenue from the banquet area to the dining room, would you expect the restaurants overall operating income to increase or decrease? Explain your reasoning to support your answer.
d. Assuming that the shift of f$8,000 of sales revenue does occur, total sales revenue will not change. Total indirect, undistributed costs will not change. Cost of sales, wages and salaries costs, and other direct costs must be recalculated for each division to find the new departmental total operating income.
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